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Asset prices and no-dividend stocks



Publishing details

Social Sciences Research Network

Authors / Editors

Atmaz A;Basak S


Publication Year



We incorporate stocks that pay no dividends into an otherwise standard, parsimonious dynamic asset pricing framework. We find that such a simple feature leads to profound asset price implications, which are all supported empirically. In particular, we demonstrate that no-dividend stocks command lower mean returns, but also have higher return volatilities and higher market betas than comparable stocks that pay dividends. We also show that the presence of no-dividend stocks in the stock market leads to a lower correlation between the stock market return and aggregate consumption growth rate, a non-monotonic and even a negative relation between the stock market risk premium and its volatility, and a downward sloping term structure of equity risk premia. We provide straightforward intuition for all these results and the underlying economic mechanisms at play


No-dividend stocks; Dynamic asset pricing; Incomplete information; Risk premium; Volatility; Market beta; Stock market correlation with consumption; Market risk premium-volatility relation; Term structure of equity premia


Social Sciences Research Network

Available on ECCH


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